A visionary new leader, Narendra Modi, has recently come to power in India. He seeks to realise India’s huge growth potential and make it a major global player. This has generated enormous optimism nationally, and internationally, about an Indian resurgence. What challenges must India overcome to achieve this?
The Narendra Modi-led government came to power with an overwhelming mandate in May 2014 and, broadly speaking, seems to be on the right track.
There is no doubt that Modi works hard and drives his government at a similar hectic pace. Midnight oil is burnt regularly in the Prime Minister’s Office, which now resembles an omnipotent and omnipresent command station.
Under Modi, the economy has improved. Inflation is down and the growth rate is up, though marginally. Foreign reserves are higher, and current account and fiscal deficits have been reined in. A number of investment projects have also been cleared and new ones announced, especially in the public sector.
The International Monetary Fund (IMF) has released an estimate that places India’s growth for 2015 to 2016 at an astounding 7.5 percent. That puts India’s growth slightly higher than China’s. Many investors had overlooked India, assuming its outrageous deficit spending would hamper its economic growth, but it seems to have had little or no negative consequence yet. This leaves many in the financial industry asking if India is the best emerging economy in which everyone should invest.
History
Godrej Group chair Adi Godrej believes that India’s current government can lead India in becoming the world’s most powerful economy. Godrej believes now gone regulations hampered India’s progress. Godrej is the 73-year-old patriarch of his company, specializing in such areas as security, appliances, real estate and agriculture. The firm operates in 28 countries, with plans to venture into emerging economies.
Indian Prime Minister Narendra Modi’s recent visit to Seychelles, Mauritius and Sri Lanka reflects New Delhi’s changed foreign policy priorities. It signals that India is no longer willing to be outmanoeuvred in the Indian Ocean region — its strategic backyard.
Modi’s visit was also part of the prime minister’s efforts to reach out to India’s neighbours. This started with his inauguration when he invited the heads of state of all the member nations of the South Asian Association for Regional Cooperation.
India is not only growing faster than China, but also every other major market in the world. India is on pace to outgrow China’s 7.5 percent growth rate in 2015 and beyond.
Ever since former Prime Minister P.V. Narasimha Rao reshaped India’s foreign policy in the 1990s under the so-called ‘Look East’ policy India has strengthened ties with Southeast Asia. The current government of Prime Minister Narendra Modi has unequivocally said that it is keen to progress from the ‘Look East’ policy to ‘Act East.’
As two mega-regional preferential trade agreements — the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) — loom closer to completion, India must move towards higher trade standards. Trade diversion from non-member countries of these mega-regional trade agreements is likely to occur and could be detrimental. This is a serious concern for developing countries cut out of the talks.
The Reserve Bank of India made an unexpected move by lowering lending rates by a quarter percent to help the government foster economic stability. This marks the second interest rate cut since January of this year.
